Mutual fund companies selectively advertise their better performing funds. However, investors respond to advertised performance data as if those data were unselected (i.e., representative of the population). We identify the failure to discount selected or potentially selected data as selection...

U.S. auditors are concerned that the greater imprecision in accounting standards under IFRS will lead to increased legal liability. We conduct an experiment with 749 mock jurors to examine how juries evaluate auditor conduct under precise and imprecise standards. We find that juries return more...

This paper reports the results of an experiment that examines how analyst forecast accuracy (i.e., how close an analyst's forecast is to realized earnings) and forecast boldness (i.e. how far the analyst's forecast is from the consensus forecast) affect the analyst's perceived credibility and...

Managers often provide self-serving disclosures that blame poor financial performance on temporary, external factors. Results of an experiment conducted with 124 financial analysts suggest that when analysts perceive such disclosures as plausible, they provide higher earnings forecasts and stock...

This study provides a theoretical framework and experimental evidence on how managers' disclosure decisions affect their credibility with investors. I find that in the short-term, more forthcoming disclosure has a positive effect on management's reporting credibility, especially when management...

The purpose of this paper is twofold. First, we provide descriptive evidence on how investors perceive financial risk. Specifically, we identify the dimensions that investors consider when judging the risk of financial items, such as bonds and interest rate swaps. Second, we investigate whether...

Individual investors increasingly rely on investment advice from social media platforms. Even advice with little, if any, predictive value appears to influence investor decisions. Our study reports the results of two experiments that help explain why investors rely on such advice. We find that...

To effectively manage audit risk, auditors must anticipate potential litigation and reputation consequences associated with inaccurate accounting estimates. Our paper examines whether auditors correctly anticipate these consequences. We provided 57 manager- and partner-level auditors with case...

More than $11 trillion is invested in mutual funds in the United States. Mutual fund investors flock to funds with high past returns, despite there being little, if any, relationship between high past returns and high future returns. Because fund management fees are based on the amount of assets...

This study provides a theoretical framework and experimental evidence on how managers' disclosure decisions affect their credibility with investors. Further, I examine whether investors' judgments of management credibility are based on different factors in the short- and longer-term. My results...